Oil Rises to 4-Week High Amid Gasoline Rally, Producer Talks

  • Gasoline rises on EIA report of U.S. supply fall, demand gain
  • Oil producers discussing March meeting: Venezuela's Del Pino

What Will Stabilize Oil Prices?

Crude rose to a four-week high after gasoline inventories dropped the first time in 15 weeks and Venezuela’s oil minister said producing countries were discussing a March meeting site.

Futures climbed 2.9 percent in New York. Gasoline stockpiles fell 2.24 million barrels last week, according to an Energy Information Administration report Wednesday. Venezuela, Russia, Qatar and Saudi Arabia are also planning to meet in July, Venezuelan Oil Minister Eulogio Del Pino says during a television broadcast on TeleSur.

"The longer we stay above $30 the greater the chance that we’ve put in a bottom," said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. "The price action is bullish itself."

Oil is down about 11 percent this year on speculation a global glut will be prolonged after the Organization of Petroleum Exporting Countries abandoned output targets in early December. Surging U.S. crude supplies and an expected Iranian output after the end of sanctions have weighed on prices.

West Texas Intermediate oil for April delivery rose 92 cents to settle at $33.07 a barrel at on the New York Mercantile Exchange. It was the highest close since Jan. 29. Futures dropped as much as 3.4 percent to $31.07 earlier. Total volume traded was 17 percent above the 100-day average at 3:19 p.m.

Gasoline Demand

Brent for April settlement climbed 88 cents, or 2.6 percent, to $35.29 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $2.22 premium to WTI after reaching $2.54 earlier, the widest gap since Dec. 11.

"This looks technical," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "We failed to break down below levels needed to sustain the decline and shot up."

Gasoline demand rose as U.S. pump prices lingered near a seven-year low. Gasoline demand rose 1.8 percent to 9.06 million barrels a day through Feb. 19, averaged over four weeks, according to EIA data. Consumption was up 5.2 percent from the same period last year.

March gasoline surged 4.5 percent to $1.056 a gallon, the highest settlement since Feb. 1.

Ridiculous Proposal

Russia, Saudi Arabia, Venezuela and Qatar, seeking to curb an oversupply that’s seen prices drop to 12-year lows, reached a preliminary agreement last week to freeze output at January levels if other states join them. A freeze is “ridiculous," Iran’s Oil Minister Bijan Namdar Zanganeh said Wednesday, according to Shana news agency.

"Absent an OPEC move to cut output I can’t think of a positive catalyst" to sustain a market rebound," said Scott Roberts, portfolio manager and co-head of high yield who manages $2.7 billion at Invesco Advisers Inc. in Atlanta. "The Saudis don’t want to change course and make cuts because they’re afraid others would just raise output."

Prices won’t recover until the second half of 2017 at the earliest, Mexican Energy Minister Pedro Joaquin Coldwell said Wednesday. The market is oversupplied by about 2 million barrels a day, Coldwell said in an interview Wednesday at the IHS CERAWeek conference in Houston. Mexico is willing to participate in a meeting with other producers to discuss a potential output freeze, but isn’t likely to cut output at this time, he said.

U.S. driller Continental Resources Inc. said Wednesday it halted all fracking in the Bakken shale region after posting its first annual loss since the company’s public debut in 2007.

"It’s going to be a tough few months for crude," said Roberts. "We’re hearing big cutbacks in earnings calls. It’s fight-for-survival mode for a lot of the companies."

  • Saudi Arabia can “co-exist with $20 a barrel” if the process of rebalancing markets pushes prices that low, although the kingdom hopes such a plunge doesn’t occur, Oil Minister Ali al-Naimi said in Houston on Feb. 23.
  • Russia said the oil output freeze it proposed with Saudi Arabia would need to last a minimum of 12 months to support prices, Energy Minister Alexander Novak told reporters on a plane flying from Moscow to Minsk in Belarus on Thursday.
  • Pierre Andurand, the hedge fund manager who predicted the oil collapse, said prices will move higher in the second half of the year. Prices will rise as inventories stabilize, the chief investment officer of London-based hedge fund Andurand Capital Management LLP said in a newsletter to investors sent this month.
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